Macfarlane: power oversupply means RET must change

Macfarlane threatens that renewable industry will be ones to lose if Labor refuses to agree to cut the large-scale target in light of large overcapacity in power market.

While Ian Macfarlane has recently distanced himself from the Warburton Review’s recommendations, in an interview on Radio National’s Breakfast program this morning, the Industry Minister suggested that the Large-scale Renewable Energy Target of 41,000 gigawatt-hours needed to be reduced in light of substantial excess capacity in the power market.

Macfarlane stopped short of saying his preferred position was to slash the target from 41,000 GWh to something closer to 26,000 GWh, consistent with capping renewables’ market share at 20 per cent. However, he wanted a bipartisan agreement with Labor over how much renewable energy was added which "addresses the fact we have 9000 megawatts ... of excess capacity".

In the clearest indicator yet that he will insist on a major cut to the scheme, Macfarlane said: “[the] Labor Party have to come to that negotiation cognisant of the fact that we have more than 15 per cent overcapacity in generation in Australia”.

He added that for Labor to "blindly continue" with the existing gigawatt-hour target which is out of alignment with the original percentage goal, it would mean it would be the “renewable industry that loses”.

He also said that an idea put forward by Business Council of Australia to reduce the target while putting in place a price floor on renewable energy certificates – presumably to preserve the value of past sunk investments – had merit.

However, this appears to have little attraction for renewable energy developers, The Australian Financial Review reports.

"I'd be very cautious about that kind of approach, that is a very interventionist approach to the market. You can get all sorts of unintended consequences," Acciona Energy MD Andrew Thomson told The AFR.

Senvion managing director Chris Judd expressed similar concerns via the newspaper: "A floor price mechanism seems to go against a core position of the COalition, that they don't wish to interfere with the market," he said.

Infigen boss Miles George called for a clear proposal: "Political impasse versus certain death under the two Warburton proposals is an easy choice for us and until the government actually comes up with a [third] proposal it's hard for us to say what we think about it. We're certainly prepared to be reasonable," he said, according to The AFR.

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